Government plans overhaul of pension system

Workers will be asked to pay into a new universal retirement fund as part of plans to shake up the pension system.

Joan Burton, the social protection minister, is examining the scheme, which will be paid for by employees and employers, as well as the State.

There will be automatic enrolment for workers in the universal pension fund which would likely be overseen by the National Treasury Management Agency.

Ms Burton said the current system of state contributory or non-contributory pensions was insufficient for the kind of retirement that people wanted.

“So we’re looking at what a lot of other countries have actually done so far, which is some form of automatic enrolment into a pension fund when people are in work, with contributions from the employee, the employer, and the State itself, with a view to building up people’s entitlements in terms of pensions to a reasonable amount to provide for a decent and adequate retirement,” she told RTÉ.

Department officials are examining pension schemes in New Zealand, Australia, and Britain.

Under plans being considered, workers would build up extra entitlements over decades under the automatic enrolment scheme.

At present, half of the working population have private pensions. State expenditure on contributory pensions, including for the public sector, amounted to 7.5% of GDP in 2010 but it is expected to rise to 11.7% by 2060.

Ms Burton said that any radical move to limit the State’s liability and provide adequate retirement funds for workers were a few years away, when people’s finances were in better shape.

“And at that point in time, it would make an awful lot of sense to have an auto-enrolment structure for Ireland. But it would be a couple of years down the track.”

It is expected the minister may outline plans for the scheme in the new year.

Under the plan, pension deductions will be made directly from employees and employers. Workers will be automatically enrolled and must seek to opt out of the scheme if they do not want to participate.

Asked why a shake up to pension schemes was needed, Ms Burton replied: “Because we’re simply not putting as a country enough aside for pensions.

“People particularly on low and middle income, or people maybe moving in and out of different jobs, they have very little opportunity to save for a traditional type pension with their employer.

“With an auto-enrolment scheme, they would be paying a fixed amount relative to their income, and the Government would also contribute to that.”


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